Analyst: Drama boom drives UK production investment

The UK Media Landscape: M&A Index from digital analysis service Broadcast Intelligence reveals a stark increase in the rate of investments in the UK film and television media market over the last five years. The number of deals has increased by 136 per cent from 2013 to 2017, with a 10 per cent year-on-year increase from 2016 to 2017.

The increased demand for British TV drama is a key driving force behind the rising number of UK M&A deals, as broadcasters and super-indies snap-up the producers behind hit series such as Killing Eve and The Missing.

“The boom in scripted drama is driving M&A to ever loftier heights; the genre represented over 40 per cent all production sector deals made in 2017, compared with just over 15 per cent in 2013,” said Matthew Evenson, Research Analyst for Broadcast Intelligence.

Scripted production companies behind hit dramas now account for a greater number of business deals than those working in areas such as factual TV. While factual features more in the earlier years, scripted drama overtook factual in 2016 as the most prominent focus of production sector M&A investment.

“As long as the consumer demand for high quality scripted drama continues remains, this trend should continue in the near future,” Evenson added.

Across the last five years, ITV was the biggest buyer of UK production companies as the studio notably increased its number of investments. More specifically, ITV was also the most prolific buyer of drama production companies; in 2017 the studio invested in seven producers, taking a controlling stake in five of them.

Notable acquisitions included a controlling stake in World Productions, the company behind hit drama Bodyguard and Line of Duty. ITV also took 45 per cent of Blumhouse Television, a US-based production company behind the HBO hit Sharp Objects and Syfy drama The Purge. ITV’s increased investment activity is aimed at supporting the international and Studio side of its business, as its future growth becomes increasingly dependent on these areas.

Across the past five years of UK-wide investment activity, the nature of the deals being made has changed: In 2013, over 80 per cent of the deals were for controlling stakes but this figure dropped to just 38 per cent in 2016, indicating that companies have been making more speculative investments.

Sky, for example, made a number of investments in technology companies, as well as making the most deals of any company in the Index. Sky’s technology deals included investments in Caavo (producers of a universal entertainment control centre), V-Nova (video compression software developers) and Circle Media Labs (producers of a parental control smart box).

Despite this increase in the number of non-controlling investments, there have also been a number of very large deals being made elsewhere in the market. Sky’s deals for Sky Italia and Sky Deutschland account for a majority of its acquisition spend and Comcast’s multi-billion-pound acquisition of Sky in H2 2018, which valued the British group at approximately £29.7 billion, is far and away the biggest deal featured in the Index.

“The Index shines a light on the M&A strategies of many of the major players in the UK market and enables a user to uncover the granular details behind the deals being made,” said Evenson.